Sharjah’s new property ownership laws mark a great leap forward

Previously, under the laws of the emirate of Sharjah, foreign ownership of real estate was limited to the right to hold a ‘usufruct’ over property in specified areas for a maximum period of 100 years only.

Non-UAE or GCC nationals were not permitted to own property on a freehold basis. A usufruct is a limited right that permits the holder to use and enjoy land owned by another, subject to various contractual and legislative restrictions. Therefore, while foreign nationals could hold such a property right, the right itself was quite restrictive and limited the foreign nationals’ ability to deal with the property. The preclusion of foreign investors from participating fully in the Sharjah real estate market meant that it did not experience the same level of property demand growth as Dubai, which has permitted such investments in designated areas for some time.

What has changed?

Article 4 of Sharjah Law No.5/2022 has restated the general position that the right of property ownership in Sharjah is limited to UAE and GCC nationals but provides for a number of exceptions whereby the right of ownership can also occur. We have summarised these exceptions as follows: ownership based on the approval of the Ruler of Sharjah; transfer by inheritance by virtue of a Sharia inheritance notice; through assignment by the owner to one of the relatives up to the first degree, as set forth in the implementing regulation of the law; and ownership in areas and projects of real estate development, as per the controls determined by the Sharjah Executive Council.

Whilst the specific areas and projects remain to be fully identified by the Sharjah Executive Council, the granting of ownership rights to foreign nationals can be seen as a positive step toward the encouragement of direct foreign investment in Sharjah real estate.

Foreign investors who have been priced out of the Dubai market due to increasing prices may now consider looking towards Sharjah to invest.

Future prospects

However, foreign investors may initially be cautious to enter this market. It should be noted that the legal framework that exists in other emirates which provides protection to foreign investors through various laws concerning, one, the ownership and maintenance of jointly owned property, and two, the sale of offplan properties and the governance of escrow accounts relating to same has not been fully fleshed out in Sharjah thus far.

Therefore, whilst the provisions of Law No.5/2022 are a welcome development, it may take some time before a complementary legal structure is in place that will provide foreign investors with the necessary comfort to invest in this market.